A check drawn by Cullen for $500 is made payable to the order of Jordan and issu

Question

A check drawn by Cullen for $500 is made payable to the order of Jordan and issued to Jordan.Jordan owes his landlord $500 in rent and transfers the check to his landlord with the following indorsement: " For rent paid, [signed] Jordan." Jordan's landlord has contracted to have Deborah do some landscaping on the property. When Deborah insists on immediate payment, the landlord transfers the check to Deborah without indorsement. Later, to pay for some palm trees purchased from Better-Garden Nursary, Deborah transfers the check with the following indorsement: " Pay to Better-Garden Nursery, wothout recourse, [signed] Deborah." Betterr-Garden Nursery sends the check to its bank indorsed " For deposit only, [signed] Better-Garden Nursery."

a) Classify each of these indorsement.

b) Was the transfer from Jordan's landlord to Deborah, without indorsement, an assgnment or a negotiation? Explain please. Thanks!

Explanation / Answer

A./

For rent paid. [Signed] Jordan is a blank indorsement. The words for rent paid have nothing to do with the proper means of transfer and negotiation of the instrument.

Pay to Better-Garden Nursery, without recourse. [Signed] Deborah is a special qualified indorsement. To properly negotiate this check, Deborah has to deliver and indorse the instrument.

For deposit only. [Signed] Better-Garden Nursery is a restrictive indorsement. It does not prohibit the further transfer or negotiation of the instrument.

B./

Negotiation is the transfer of an instrument in such form that the transferee becomes a holder. If the instrument is order paper, the transfer requires an indorsement plus delivery for negotiation. If the instrument is bearer paper, the transfer requires only a delivery for negotiation.

The method used for negotiation depends on the character of the instrument (order or bearer) at the time of the negotiation. The check issued to Jordan was order paper. For negotiation, Jordan was required to indorse and deliver the check to his landlord. One type of indorsement is a blank indorsement (indorser's signature only); this indorsement changes the character of the instrument from order to bearer. Because a bearer instrument can be negotiated by delivery only, without indorsement, Jordan's landlord did effectively negotiate the check to Deborah.

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